Whatās Going On Here?The US president launched a fresh offensive on Friday against anticompetitive company practices in several sectors, with Big Tech a particular target. What Does This Mean?The American administration is worried that tech giants currently have too much power to exploit usersā personal data and squeeze out smaller competitors. Fridayās executive order proposes to tackle this problem in two ways. First, it calls for regulatory reforms improving scrutiny of merger deals in the tech sector and preventing dominant companies from taking would-be rivals out of the market. Second, it suggests new rules increasing oversight of firmsā data-collection and user-surveillance practices.
But the presidentās new plans cover more than just the tech sector. Also in his crosshairs is the pharmaceutical industry ā with government health officials asked to help drive down the prices of prescription drugs by importing cheaper alternatives from Canada, among other things. Why Should I Care?For markets: Weāre all tied to tech.
If successfully implemented, this latest crackdown could hit tech firmsā growth ā and with valuations sky-high, their share prices are vulnerable. The five biggest tech companies ā Apple, Microsoft, Alphabet, Amazon, and Facebook ā are currently worth an average 31x next yearās forecast earnings, almost 50% more than the US S&P 500 overall (tweet this). But even those passively invested in the index should be worried: these five firms represent almost a quarter of its total market value.
Zooming out: Tech today, crypto tomorrow?
If regulators are being asked to reduce consumer harm, then the crypto industry looks ripe for intervention. That could be bad news for Circle, the crypto-focused payments firm that last week announced plans to āgo publicā later this year via a $4.5 billion merger with a special-purpose acquisition company (SPAC). Circleās popular USDC stablecoin is pegged to the value of the US dollar ā but with 90% of the worldās central banks exploring digital versions of their respective currencies, such unofficial competitorsā days may be numbered. | 